Push for $10.10 minimum wage would create winners, losers in Ohio

Apr. 6, 2014

A buss with a sign '$10.10'on the side arrives for a news conference in view of City Hall Thursday, March 27, 2014, in Philadelphia. Americans United for Change has a scheduled 11 state bus tour advocating for an increase in the minimum wage from $7.25 to $10.10 an hour. (AP Photo/Matt Rourke) / AP

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CentralOhio.com

By the numbers: minimum wage

• The first federal minimum wage was set at 25 cents an hour — the equivalent of $4.16 an hour today — for certain industries in 1938. • The most recent increase to the federal minimum wage was in July 2009, when the federal minimum wage rose from $6.55 to $7.25. • People who support a higher minimum wage say the baseline wage hasn’t kept up with inflation. The minimum wage in 1968 was $1.60, which would amount to $10.79 in 2014. • In 2006, Ohioans voted to increase the state minimum wage from $5.15 to $6.85 and adjust subsequent years’ minimum wages with inflation. The constitutional amendment passed with 56.7 percent of the vote. However, voters in 22 counties opposed the change. • Ohio’s minimum wage is $7.95, up 10 cents from 2013. The minimum wage for employees of smaller companies — those that gross less than $292,000 — is $7.25, the federal minimum wage. • Ohio is one of 21 states that has a higher minimum wage than the federal standard. • Ohio also has a higher minimum wages than any of its surrounding states. Michigan’s current minimum wage is $7.40 an hour; Indiana, Kentucky, Pennsylvania and West Virginia use the federal minimum wage. Source: U.S. Department of Labor Statistics, Ohio Department of Commerce

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Amy Zickefoose’s husband works long, difficult hours with machines in Tennessee, hundreds of miles from their Mansfield home. For this dangerous work, he receives $11 an hour.

State and federal politicians have proposed raising the minimum wage to $10.10 an hour by 2016, but Zickefoose said fast-food employees shouldn’t be paid that much.

“I definitely don’t feel (they) should make almost as much as my husband,” said, Zickefoose, adding that she doesn’t believe an increase would help her family. “I know his boss wouldn’t give him another dollar.”

An increase in the minimum wage, which is $7.95 an hour in Ohio, would mean layoffs and potentially higher food prices, but also better-paid workers and potentially lower costs for social services. Whether that sounds like a great or horrible idea depends largely on where you fit into the workforce.

“From the employees’ perspective, a wage increase is always appreciated,” said Randy Davies, president and CEO of the Chillicothe-Ross Chamber of Commerce. “There are many aspects a small business owner would have to adjust.”

The Congressional Budget Office estimated 500,000 workers, or 0.3 percent of the American workforce, would lose their jobs by 2016 if Congress raised the minimum wage to $10.10 an hour. However, another 16.5 million would see their wage increase, the report stated.

An estimated 1.1 million Ohio workers, those earning below $10.10 an hour, would receive an extra $1.54 billion if the minimum wage were raised, according to a report released by the Economic Policy Institute, a liberal think tank.

That would increase economic activity in Ohio by $977.3 million, according to the report, which indicated there would be little or no job loss statewide if the minimum wage were raised by $2.15.

The winners

About 3.3 million American workers, including 137,000 Ohioans, were paid at or below the federal minimum wage of $7.25 an hour in 2013, according to the U.S. Bureau of Labor Statistics. That amounts to about 4 percent of the American workforce.

A worker receiving federal minimum wage would receive $15,080 a year, which is below the federal poverty line for a family of two —$15,730. Ohio’s minimum wage worker would receive $16,536 a year; depending on each family’s size, that may or may not be adequate.

A single person would need $15,987 to have a living wage in Ross County; a family of four would require $34,466, according to the Massachusetts Institute of Technology’s living wage calculator.

Although Ohio’s minimum wage is higher than the federal minimum wage, it’s still inadequate to pay for a two-bedroom apartment, according to a National Low Income Housing Coalition study. Ohioans would have to work 70 hours a week at minimum wage to afford that living space, assuming they’re putting 30 percent of their income toward rent, the study found.

But many individuals making minimum wage take advantage of other safety net programs, such as Medicaid and income tax credits for people with lower incomes.

Fifty-two percent of front-line fast-food workers — those not in management — and their families are enrolled in one or more public programs, compared with 25 percent of the overall workforce, according to a 2013 study by the University of California Berkeley Labor Center and University of Illinois.

The report estimated the cost of public assistance for fast-food workers’ families was $7 billion a year, including $3.9 billion for Medicaid and the Children’s Health Insurance Program, which insures children whose families make too much for Medicaid and too little for public insurance. Other benefits included about $1.04 billion in food stamps and $1.91 billion in income tax credits.

Many businesses can afford to raise the minimum wage to reduce the number of employees reliant on social service programs, said Anna Chu, a policy director with the progressive ThinkProgress who wrote a report on the benefits of raising Ohio’s minimum wage for the Center for American Progress Action Fund.

“A lot of companies pay higher than minimum wage and are still profitable,” Chu said.

The losers

However, the prospect of paying employees more may be daunting for employers, especially those operating small businesses or restaurants, which work on tight profit margins, said Jim Evans, president of JK Evans & Associates, a human resources consulting firm in Zanesville.

Those extra costs mean higher prices on products — a challenge for independent grocers already competing with low prices at chain stores. Crutcher estimated her business has raised the price of goods by 25 percent because of the rising state minimum wage.

A higher minimum wage also can play a role in hiring decisions, she said.

“We haven’t had to lay anybody off, but we can’t hire people either,” Crutcher said.

Although the restaurant industry would likely be hit the hardest by a minimum wage increase, the effect on food prices nationwide wouldn’t be dramatic, Chu said.

A restaurant hamburger likely wouldn’t increase more than 10 cents, and consumers might spend another nickel on a bag of groceries, according to a 2012 report from the Food Labor Research Center at the University of California, Berkeley, and the Food Chain Workers Alliance and Restaurant Opportunities Centers United. The study reviewed the effects of a proposal to raise minimum wage to $9.80 and increase tipped workers’ pay.

But business owners value autonomy and the opportunity to make wage decisions based on market prices.

“There’s a general sense that they would like that to be their choice and not a mandated choice,” said Don Plotts, interim president of the Richland County Area of Commerce.

Will it happen?

The biggest proponents of an increased minimum wage seem to be the people with the least power to make it happen politically.

Reps. Mike Foley, D-Cleveland, and Bob Hagan, D-Youngstown, recently introduced a bill that would raise Ohio’s minimum wage to $10.10 and make employers pay tipped employees the same wage if they could not prove employees were making it up in tips. In the Republican-controlled Ohio General Assembly, the bill might not receive a hearing.

President Barack Obama hasn’t had much more luck on the federal level. Members of the GOP-led House of Representatives have made it clear that raising the minimum wage is not a priority.

But that doesn’t mean business owners aren’t watching the topic closely, said Evans, adding that the potential effects have been debated in various human resources publications he receives.

“I think it’s going to affect every business differently, but it will affect them,” he said.